third quarter 2026
Filed Oct 28, 2026Encompass Health reports results for third quarter 2026; increases full-year guidance
Third-quarter net operating revenue increased 8.9%, adjusted EBITDA increased 15.5%, adjusted earnings per share increased 23.6%, and the Company increased its full-year 2026 guidance ranges.
Key metrics
shortened, hover for the filing’s print| Metric | Value | q/q | y/y |
|---|---|---|---|
| Net operating revenues - three months ended September 30, 2026GAAP | $1.61B | – | 8.9 % |
| Net operating revenues - nine months ended September 30, 2026GAAP | $4.79B | – | – |
| Salaries and benefits - three months ended September 30, 2026GAAP | 840.7 | – | – |
| Salaries and benefits - nine months ended September 30, 2026GAAP | 2,479.1 | – | – |
| Other operating expenses - three months ended September 30, 2026GAAP | 245.2 | – | – |
| Other operating expenses - nine months ended September 30, 2026GAAP | 742.0 | – | – |
| Occupancy costs - three months ended September 30, 2026GAAP | 15.0 | – | – |
| Occupancy costs - nine months ended September 30, 2026GAAP | 44.9 | – | – |
| Supplies - three months ended September 30, 2026GAAP | 65.0 | – | – |
| Supplies - nine months ended September 30, 2026GAAP | 195.4 | – | – |
| General and administrative expenses - three months ended September 30, 2026GAAP | 59.9 | – | – |
| General and administrative expenses - nine months ended September 30, 2026GAAP | 180.7 | – | – |
| Depreciation and amortization - three months ended September 30, 2026GAAP | 95.7 | – | – |
| Depreciation and amortization - nine months ended September 30, 2026GAAP | 273.4 | – | – |
| Total operating expenses - three months ended September 30, 2026GAAP | 1,321.5 | – | – |
| Total operating expenses - nine months ended September 30, 2026GAAP | 3,915.5 | – | – |
| Income from continuing operations before income tax expense - three months ended September 30, 2026GAAP | 257.8 | – | – |
| Income from continuing operations before income tax expense - nine months ended September 30, 2026GAAP | 808.1 | – | – |
| Provision for income tax expense - three months ended September 30, 2026GAAP | 53.4 | – | – |
| Provision for income tax expense - nine months ended September 30, 2026GAAP | 163.4 | – | – |
| Income from continuing operations - three months ended September 30, 2026GAAP | 204.4 | – | – |
| Income from continuing operations - nine months ended September 30, 2026GAAP | 644.7 | – | – |
| Net income - three months ended September 30, 2026GAAP | 203.6 | – | – |
| Net income - nine months ended September 30, 2026GAAP | 659.2 | – | – |
| Net income attributable to Encompass Health - three months ended September 30, 2026GAAP | $149.9M | – | – |
| Net income attributable to Encompass Health - nine months ended September 30, 2026GAAP | $498.3M | – | – |
| Diluted earnings per share attributable to Encompass Health common shareholders, continuing operations - three months ended September 30, 2026GAAP | $ 1.51 | – | 21.8 % |
| Diluted earnings per share attributable to Encompass Health common shareholders, continuing operations - nine months ended September 30, 2026GAAP | $ 4.83 | – | – |
| Diluted net income per share attributable to Encompass Health common shareholders - three months ended September 30, 2026GAAP | $ 1.50 | – | – |
| Diluted net income per share attributable to Encompass Health common shareholders - nine months ended September 30, 2026GAAP | $ 4.97 | – | – |
| Adjusted earnings per share - three months ended September 30, 2026non-GAAP | $ 1.52 | – | 23.6 % |
| Adjusted earnings per share - nine months ended September 30, 2026non-GAAP | $ 4.67 | – | – |
| Adjusted EBITDA - three months ended September 30, 2026non-GAAP | $346.6M | – | 15.5 % |
| Adjusted EBITDA - nine months ended September 30, 2026non-GAAP | $1.04B | – | – |
| Cash flows provided by operating activities - three months ended September 30, 2026GAAP | 362.0 | – | 33.7 % |
| Net cash provided by operating activities - nine months ended September 30, 2026GAAP | 957.7 | – | – |
| Adjusted free cash flow - three months ended September 30, 2026non-GAAP | 263.4 | – | 51.2 % |
| Adjusted free cash flow - nine months ended September 30, 2026non-GAAP | 634.2 | – | – |
| Discharges - three months ended September 30, 2026other | 69,605 | – | 5.7 % |
| Same-store discharge growth - three months ended September 30, 2026other | 3.0 % | – | – |
| Net patient revenue per discharge - three months ended September 30, 2026other | $ 22,543 | – | 4.0 % |
| Cash and cash equivalents - September 30, 2026GAAP | $ 76.2 | – | – |
| Long-term debt, net of current portion - September 30, 2026GAAP | 2,551.3 | – | – |
| Current portion of long-term debt - September 30, 2026GAAP | 47.8 | – | – |
| Purchases of property, equipment, and intangible assets - nine months ended September 30, 2026GAAP | (617.2) | – | – |
| Net cash used in investing activities - nine months ended September 30, 2026GAAP | (627.3) | – | – |
| Net cash used in financing activities - nine months ended September 30, 2026GAAP | (333.1) | – | – |
Amounts quoted below without a unit are in millions, as in the filing’s tables. Per-share figures are as printed.
Full-Year 2026 outlook
- Revenue$6,450 to $6,500
- NoteAdjusted EBITDA $1,395 to $1,415
- NoteAdjusted earnings per share from continuing operations attributable to Encompass Health $6.23 to $6.37
Capital returns
- Repurchases of common stock, including fees and expenses - nine months ended September 30, 2026: (203.7); 2025: (81.7)
- Dividends paid on common stock - nine months ended September 30, 2026: (57.9); 2025: (52.1)
- Distributions paid to noncontrolling interests of consolidated affiliates - nine months ended September 30, 2026: (141.8); 2025: (109.4)
What drove it
- Net operating revenue increased 8.9% in the third quarter.
- Discharges increased 5.7%, same-store discharge growth was 3.0%, and net patient revenue per discharge increased 4.0%.
- During the first nine months of 2026, the Company opened four hospitals totaling 189 beds and added 85 beds to existing hospitals.
- Adjusted EBITDA increased 15.5% and adjusted free cash flow increased 51.2% in the third quarter.
Concerns
- Salaries and benefits were 840.7 in the third quarter of 2026 compared with 784.8 in the third quarter of 2025.
- Depreciation and amortization was 95.7 in the third quarter of 2026 compared with 82.4 in the third quarter of 2025.
- The Company reported a loss on early extinguishment of debt of 3.4 for the nine months ended September 30, 2026.
- Forward-looking risk factors cited include reimbursement changes, staffing shortages, labor costs, Medicare audit activity, regulatory developments, competitive pressures, and construction-material and supply costs.
What to watch
- Execution against updated full-year 2026 net operating revenue guidance of $6,450 to $6,500.
- Execution against updated adjusted EBITDA guidance of $1,395 to $1,415.
- Discharge volume, same-store discharge growth, and net patient revenue per discharge.
- Hospital and bed additions as the Company pursues demand for inpatient rehabilitation services.
- Capital expenditures and debt activity following purchases of property, equipment, and intangible assets of (617.2) in the first nine months of 2026.
Balance sheet and cash flow
- Cash and cash equivalents at September 30, 2026: $ 76.2; December 31, 2025: $ 72.2
- Restricted cash at September 30, 2026: 24.0; December 31, 2025: 30.7
- Cash, cash equivalents, and restricted cash at end of period for the nine months ended September 30, 2026: $ 100.2; 2025: $ 93.7
- Long-term debt, net of current portion at September 30, 2026: 2,551.3; December 31, 2025: 2,447.2
- Total assets at September 30, 2026: $ 7,566.5; December 31, 2025: $ 7,089.7
- Net cash used in investing activities for the three months ended September 30, 2026: $241.6 million; 2025: $201.3 million
- Net cash used in financing activities for the three months ended September 30, 2026: $153.7 million; 2025: $113.2 million
Analysis
Encompass Health reported a strong third quarter. Net operating revenue was $ 1,609.5 versus $ 1,477.5 in the prior-year quarter, with the Company reporting 8.9% growth. Discharges were 69,605 versus 65,839, same-store discharge growth was 3.0%, and net patient revenue per discharge was $ 22,543 versus $ 21,679. These reported operating indicators accompanied revenue growth across the quarter.
Profit and cash flow growth outpaced reported revenue growth. Adjusted EBITDA was $ 346.6 versus $ 300.1, and adjusted earnings per share was $ 1.52 versus $ 1.23. GAAP diluted earnings per share from continuing operations was $ 1.51 versus $ 1.24. Cash flows provided by operating activities were 362.0 versus 270.8, while adjusted free cash flow was 263.4 versus 174.2.
The cost base also increased. Salaries and benefits were 840.7 versus 784.8, other operating expenses were 245.2 versus 231.1, and depreciation and amortization was 95.7 versus 82.4. For the first nine months, the Company reported $ 4,793.5 of net operating revenues, $ 1,043.4 of adjusted EBITDA, and $ 4.67 of adjusted earnings per share. The nine-month results included a 3.4 loss on early extinguishment of debt and a 17.5 gain on sale of Gamma Knife.
The Company continued to direct cash toward expansion, shareholder returns, and debt activity. Purchases of property, equipment, and intangible assets were (617.2) for the first nine months, while repurchases of common stock were (203.7) and dividends paid were (57.9). Cash and cash equivalents were $ 76.2 at September 30, 2026, and long-term debt, net of current portion, was 2,551.3.
Management increased its full-year outlook. Net operating revenue guidance moved to $6,450 to $6,500 from $6,410 to $6,490, adjusted EBITDA guidance moved to $1,395 to $1,415 from $1,365 to $1,395, and adjusted earnings per share guidance moved to $6.23 to $6.37 from $6.02 to $6.25. The filing does not provide comparable GAAP guidance other than net operating revenues because it says future reconciling items cannot be predicted with reasonable certainty.
Management, verbatim
We are very pleased with our performance for the third quarter, with revenue increasing 8.9% and Adjusted EBITDA growing 15.5%.
Mark Tarr, President and Chief Executive Officer
During the first nine months of 2026, we opened four hospitals totaling 189 beds and added 85 beds to existing hospitals, reflecting our commitment to meeting the growing demand for high-quality inpatient rehabilitation services.
Mark Tarr, President and Chief Executive Officer
Our value proposition and disciplined operating strategy continue to be validated, and we remain highly optimistic about the long-term prospects of our business.
Mark Tarr, President and Chief Executive Officer
Not in the filing
stated, not guessed- Operating income was not reported as a separately labeled line item.
- Gross margin was not reported.
- Segment revenue and segment profitability were not reported.
- Prior-quarter figures and sequential changes were not reported for the presented operating metrics.
- A previous-release outlook was not provided; therefore, no actual-versus-prior-guidance comparison is included.
- Guidance for gross margin, operating expenses, and tax rate was not reported.
- Third-quarter balance sheet debt and cash-flow line-item comparisons with the immediately preceding quarter were not reported.
Written by an AI language model from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure is checked against the filing text, and a metric the filing does not print, or whose value, prior period and change do not add up, is dropped from the metrics. The model can still misread a table, in the metrics or in the text, so check a number in the filing before you rely on it. Consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.